Happy January 2022: It’s Not Just About the W-2 This Year

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For those of you who do not study domestic relations as a hobby, there are some usual and unusual aspects to THIS new year.

First; foremost, the child support guidelines were modified effective January 1. Generally, rates increased 4-5% although those changes are by no means uniform. The BIG change is that if combined net income exceeds $30,000 per month the presumptive minimum supports amounts were slashed. Understand that because the guidelines change only once each four years, the guideline change itself is a “change in circumstance” allowing modification of support on that basis alone. Another change in the guidelines that is important is the new “day care provision.” In the past courts have always had the power attribute earning capacity to support litigants who were not employed but it was never clear whether the earning capacity should be adjusted for the cost of day care. The rule changes indicate that if day care would be required, it must be factored in deciding net earning capacity for support purposes.

Second, many households received direct payments from the IRS beginning in July, 2021. This child tax credit is income for purposes of support just like the old tax credits because it is a payment due and collectible under 23 Pa.C.S.  4302.  So this is also a value that needs to go into the support calculation together with the Forms W-2 which are supposed to issue not later than January 28.

The IRS keeps records of tax credit payments you received and they have been directed to issue something called a 6419 letter. The announcement about this is found here.

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

www.irs.gov/newsroom/irs-sending-information-letters-to-recipients-of-advance-child-tax-credit-payments-and-third-economic-impact-payments

Realize as well that the payments that were pumped out in 2021 were based upon estimates the IRS made from your prior tax returns. Taxpayers may not be eligible for the money they received if their actual income in 2021 was greater than the IRS estimates based on former returns. If you received those monthly deposits and end up being what football fans term
an “ineligible receiver” you owe some or all that money back to Uncle Sam. This means that not all the ‘income’ from stimulus paid will be retained. In fact, it may be little more than a loan which the IRS will ultimately collect.

This has created complications for any hearing officer or judge charged with deciding support matters. Some have already noted that these payments may justify lump sum adjustments (much as with a single bonus or a lottery win) but probably should not be part of a permanent order because the IRS payments essentially ended in December, 2021.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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